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Separating Moral Hazard From Adverse Selection And Learning In Automobile Insurance: Longitudinal Evidence From France

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  • Georges Dionne
  • Pierre-Carl Michaud
  • Maki Dahchour

Abstract

The identification of information problems in different markets is a challenging issue in the economic literature. In this paper, we study the identification of moral hazard from adverse selection and learning within the context of a multi-period dynamic model. We extend the model of Abbring et al. (2003) to include learning and insurance coverage choice over time. We derive testable empirical implications for panel data. We then perform tests using longitudinal data from France during the period 1995-1997. We find evidence of moral hazard among a sub-group of policyholders with less driving experience (less than 15 years). Policyholders with less than 5 years of experience have a combination of learning and moral hazard, whereas no residual information problem is found for policyholders with more than 15 years of experience.
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Suggested Citation

  • Georges Dionne & Pierre-Carl Michaud & Maki Dahchour, 2013. "Separating Moral Hazard From Adverse Selection And Learning In Automobile Insurance: Longitudinal Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 897-917, August.
    • Handle: RePEc:bla:jeurec:v:11:y:2013:i:4:p:897-917
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    File URL: http://hdl.handle.net/10.1111/jeea.2013.11.issue-4
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    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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